CHOW SANG SANG HOLDINGS INTERNATIONAL LIMITED 周 生 生 集 團 國 際 有 限 公 司 Stock code: 116
2020 Interim Results Presentation
August 2020 Disclaimer
The information, statements and opinions contained in this Presentation and any subsequent discussion do not constitute an offer to sell or solicitation of any offer to subscribe for or purchase any securities or other financial instruments or any advice or recommendation in respect of such securities or other financial instruments.
Potential investors and shareholders (the “Potential Investors and Shareholders”) of Chow Sang Sang Holdings International Limited (the “Company”) are reminded that information contained in this Presentation and any subsequent discussion comprises extracts of operational data and financial information of the Company and its subsidiaries (the “Group”) for the current reporting period. The information included in this Presentation and any subsequent discussion, which does not purport to be comprehensive nor render any form of financial or other advice, has been provided by the Group for general information purposes only and certain information has not been independently verified. No representations or warranties, expressed or implied, are made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information, statements or opinions presented or contained in this Presentation and any subsequent discussion or any data which such information generates.
The performance data and the results of operations of the Group contained in this Presentation and any subsequent discussion are historical in nature, and past performance is no guarantee of the future results of the Group. Any forward-looking statements and opinions contained in this Presentation and subsequent discussion are based on current plans, beliefs, expectations, estimates and projections at the date the statements and opinions are made, and therefore involve risks and uncertainties. There can be no assurance that any of the matters set out in such forward-looking statements is attainable, will actually occur or will be realised or are complete or accurate. Actual results may differ materially from those stated, implied and/or reflected in such forward-looking statements and opinions. The Group, the Directors, officers, employees and agents of the Group assume (a) no obligation to correct, update or supplement the forward-looking statements or opinions contained in this Presentation and any subsequent discussion; and (b) no liability in the event that any of the forward- looking statements or opinions does not materialise or turn out to be incorrect.
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1 Presentation Outline
I. Business Overview
II. Financial Highlights
III. Business Review
IV. Strategy Outline
V. Q&A Session
VI. Appendix
2 Date Here Business Overview
3 Business Segments
Chow Sang Sang Holdings International Limited
Wholesale of Securities and Jewellery Precious Metals Futures Broking
⚫ Manufacture of jewellery ⚫ Retail of jewellery (Gold, Gem-set, Platinum, Karat Gold and Watch) ⚫ Branded stores:
⚫ Watch boutique: Rolex and Tudor
4 Chow Sang Sang Jewellery Business Model
⚫ Experienced team responsible for procurement of precious metals and gemstones Procurement ⚫ Being De Beers and Alrosa sightholder
⚫ Over 60% of our collections created by in-house design team Design ⚫ Others mostly through collaborative efforts with established ODM and OBM suppliers
⚫ Self-owned diamond cutting and polishing centre Production ⚫ Full-service jewellery manufacturing facilities
⚫ In-house The Hong Kong Laboratory Accreditation Scheme (HOKLAS) and China National Quality Accreditation Service for Conformity Assessment (CNAS) accredited laboratories to uphold a strict quality standard Control ⚫ Most of our diamond jewellery comes with GIA, IGI, De Beers Group Industry Services and/or NGTC certificates
Intelligent ⚫ RFID-enabled product tags and devices Fulfilment ⚫ Automated warehousing and dispatch facilities
⚫ Over 700 self-run physical stores in Hong Kong, Macau, Mainland China and Taiwan Distribution ⚫ Omni-channel retailing aims at serving our customers seamlessly across all online and offline channels ⚫ Multi-brand stores offering wide variety of products to meet customers’ needs and tastes
5 Distribution Network as at 30 Jun 2020
Mainland China
Number City Number Region of stores tier of stores Heilongjiang North 85 1 150
East 117 2 270 Inner Mongolia Jilin South 199 3 138 Xinjiang Liaoning Beijing West 105 4 58
Tianjin Beijing Surrounding 110 - - Gansu Hebei Provinces Ningxia Shanxi Shandong Qinghai Total: 616 Total: 616 Shaanxi Henan Jiangsu Tibet Anhui
Hubei Shanghai Chongqing Sichuan Zhejiang Hunan Jiangxi e-shop Guizhou Fujian ⚫ chowsangang.com Guangdong ⚫ Tmall Yunnan Guangxi ⚫ JD Taiwan ⚫ VIP Hainan ⚫ other e-Commerce 25 stores platforms Hong Kong and Macau 67 stores
6 Store Expansion
Increasing No. of Stores in Mainland China
(No. of Stores) 800 700 708 700 24 25 599 70 67 600 26 519 67 500 472 25 24 72 400 74
300 606 616 506 200 374 422
100
0 2016 2017 2018 2019 2020 06
Mainland China HK and Macau Taiwan
7 Store Count by Brand As at 31 Dec 2019 Addition Closed As at 30 Jun 2020 Hong Kong and Macau 49 - 1 48 4 1 1 4 5 - 2 3 Rolex/Tudor 12 - - 12 Sub-total 70 1 4 67 Mainland China 561 20 13 568 7 2 - 9 25 - 1 24 - 1 - 1 - 1 - 1 Rolex/Tudor 13 - - 13 Sub-total 606 24 14 616 Taiwan 24 1 - 25 Total 700 26 18 708
8 Date Here Financial Highlights
9 Operating Performance
Turnover Gross Profit
(HK$M) (HK$M) 27.6% 30,000 6,000 26.9% 24.6% 25.0% 25,000 5,000 4,777 4,631
20.0% 20,000 18,806 4,000 17,736 2,203 2,271 15.0% 15,000 3,000 9,248 8,196
10.0% 10,000 2,000
2,360 2,574 5,000 1,000 5.0% 9,558 9,540 1,771 6,418
0 0 0.0% 2018 2019 2020 2018 2019 2020 1H 2H Gross Margin
10 Operating Performance (Cont’d)
Earnings Before Interest, Taxes, Depreciation Profit attributable to equity holders and Amortisation* (HK$M) (HK$M) 1,800 9.0% 8.4% 1,800 7.0% 1,573 1,600 8.0% 1,600 7.2% 6.0% 5.4% 1,400 7.0% 6.6% 1,400 5.0% 644 1,162 1,200 6.0% 1,200
232 1,012 3.6% 1,000 5.0% 1,000 4.0% 3.3%
800 4.0% 406 800 3.0% 644 600 3.0% 600 29 929 930 2.0% 400 2.0% 400 606 615 465 1.0% 200 1.0% 200 211 0 0.0% 0 0.0% 2018 2019 2020 2018 2019^^ 2020 1H 2H Margin 1H 2H Net Profit Margin
* On pre-HKFRS 16 basis ^^ Included margin loan provisions (HK$372M)
11 Driven by Jewellery Segment
Turnover Breakdown Results Breakdown
0.2% 0.1% 0.1% 100% 0.2% 0.4% 0.4% 100% 0.1% 0.2% 3.1% 2.6% 1.8% 0.2% 1.2% 0.4% 9.1% 7.8% 1.6% 11.6% 90% 90% 80% 80% 70% 70%
60% 60%
50% 50% 95.5% 96.6% 96.2% 92.0% 90.5% 88.1% 40% 40%
30% 30%
20% 20%
10% 10%
0% 0% 2018 1H 2019 1H 2020 1H 2018 1H 2019 1H 2020 1H
Jewellery Wholesale Broking Others Jewellery Wholesale Broking Others
12 Jewellery Performance
Jewellery – Turnover Jewellery – Operating Results
(HK$M) (HK$M) 20,000 2,000 9.0% 7.9% 17,130 8.0% 16,258 7.0% 7.0% 15,000 1,500 1,282 6.0% 1,205 8,484 7,485 5.0% 5.0% 521 10,000 1,000 472 4.0%
3.0%
5,000 500 8,646 8,773 2.0% 733 761 5,651 1.0% 285 0 0 0.0% 2018 2019 2020 2018 2019 2020 1H 2H Margin
13 Jewellery Performance by Geographical Area
Jewellery Segment Gross Profit Jewellery Segment Result
(HK$M) (HK$M) 4,500 40.5% 1,000 10.0% 39.1% 38.6% 40.0% 8.7% 4,000 34.7% 35.0% 800 760 8.0% 31.8% 3,500 30.5% 0.1 7.0% 30.0% 3,000 26.9% 600 6.0% 24.6% 522 2,549 23.1% 25.0% 5.0% 2,500 7 23 2,181 612 284 1 31 20.0% 400 4.0% 2,000 1,744 1,571 24 15.0% 483 1,500 1,443 200 437 2.0%
1,000 1,279 10.0% 148 0 32 0.0% 500 955 5.0% 707 441 -154 0 0.0% 2019 1H 2019 2H 2020 1H 2019 1H 2019 2H 2020 1H -200 -2.0% HK&Mac Mainland China Taiwan HK&Mac GP Mainland China GP Taiwan GP Taiwan Mainland China HK&Mac Margin
14 Jewellery Turnover by Geographical Area
2019 1H 2019 2H 2020 1H
Taiwan Taiwan Taiwan 1% 1% 1%
HK & HK & HK & Macau Macau Macau 41% 38% 34% Mainland Mainland Mainland China China China 58% 61% 65%
15 Jewellery Gross Profit by Geographical Area
2019 1H 2019 2H 2020 1H
Taiwan Taiwan Taiwan 1% 1% 1%
HK & HK & HK & Macau Macau Macau 37% 33% 25% Mainland Mainland Mainland China China China 62% 66% 74%
16 Hong Kong and Macau Jewellery Sales Mix
17 Mainland China Jewellery Sales Mix
18 Hong Kong and Macau Jewellery SSSG
40%
20%
0%
-20%
-40%
-60%
-80% 2017 1H 2017 2H 2018 1H 2018 2H 2019 1H 2019 2H 2020 1H Overall Gold Gem-set
19 Mainland China Jewellery SSSG
20%
10%
0%
-10%
-20%
-30%
-40%
-50% 2017 1H 2017 2H 2018 1H 2018 2H 2019 1H 2019 2H 2020 1H Overall Gold Gem-set
20 Jewellery: Change of Average Selling Price
Hong Kong and Macau - Gold Hong Kong and Macau - Jewellery
(HK$) (HK$)
8,000 15,000 6,400 11,900 11,000 6,000 5,000 5,000 9,900 10,000 4,000 5,000 2,000
0 0 2018 2019 2020 1H 2018 2019 2020 1H
Mainland China - Gold Mainland China - Jewellery
(RMB) (RMB) 5,000 12,000 4,000 8,500 9,000 7,700 8,300 2,800 3,000 2,400 2,600 6,000 2,000 1,340 1,400 1,500 2,500 2,500 2,600 1,000 3,000 0 0 2018 2019 2020 1H 2018 2019 2020 1H e-shop Exclude e-shop e-shop Exclude e-shop
21 E-shop Sales as a Percentage of Mainland China Sales
22%
20% 20%
18%
16% 16% 15% 14% 14%
12% 12%
10% 9%
8% 2015 2016 2017 2018 2019 2020 1H
22 Working Capital Trends
Average Inventory Turnover Days Average Receivables Turnover Days
(No. of Days) (No. of Days)
400 25 22 322 19 20 300 20 231 192 15 200 10 100 5
0 0 2018 2019 2020 1H 2018 2019 2020 1H
Average Payables Turnover Days Cash Conversion Cycle
(No. of Days) (No. of Days) 10 400 340 8 300 247 6 208 4 4 200 4 3 2 100
0 0 2018 2019 2020 1H 2018 2019 2020 1H
23 Financial Highlights (HK$M) For the 6 months ended % change 2018 2019 2020 20 vs 19 Turnover 9,558 9,540 6,418 -32.7% Jewellery 8,646 8,773 5,651 -35.6% Other businesses 912 767 767 +0.0% Gross profit 2,360 2,574 1,771 -31.2% Operating profit* 797 816 329 -59.7% EBITDA* 929 930 465 -50.0% Profit attributable to equity holders 606 615 211 -65.7% Basic EPS (HK cents) 89.4 90.8 31.2 -65.6% Dividend per share (HK cents) 15.0 14.0 5.0 -64.3% Capital expenditure 133 145 93 -35.9%
* On pre-HKFRS 16 basis
24 Other Financial Information
(HK$M) As at Dec-31 Jun-30 2018 2019 2020 Cash and cash equivalents 1,303 1,028 1,864 Long term listed investments* 807 901 1,175 Gearing# 18.6% 25.3% 20.1% Unused banking facilities 4,080 3,992 4,024
* Long term listed investments represents HKEX shares which valued at quoted market prices
# Total borrowings to total equity holders’ equity. Total borrowings includes interest-bearing bank borrowings, bullion loans and interest-bearing bank borrowings arising from securities and futures broking
25 Date Here Business Review
26 Business Review
Hong Kong and Macau
⚫ Business was significantly impacted by COVID-19 and loss of tourist sales ⚫ Notable SSSG decreases were recorded across most product types except watch ⚫ Soaring gold prices deterred buying
Mainland China
⚫ COVID-19 caused significant business disruptions in 1Q ⚫ SSSG narrowed from -45% in 1Q to -13% in 2Q ⚫ Watch delivered solid performance with +27% SSSG ⚫ Online sales accounted for 20% of sales ⚫ Personalised Jewellery Service business continued to grow ⚫ New PROMESSA and MARCO BICEGO specialty stores were launched
27 Date Here Strategy Outline
28 Strategy Outline
Store Expansion
⚫ Adopt self-run store model to provide consistent and superior service quality ⚫ Maintain steady Chow Sang Sang and specialty store expansion in Mainland China ⚫ Multi-brand strategy: EMPHASIS, MINTYGREEN, PROMESSA and MARCO BICEGO ⚫ Realign Hong Kong network to take account of change in customer base from visitor-dominant to local consumption mode
Products and Brands
⚫ Develop house brands and collections ⚫ PROMESSA - provide made-to-order personalised jewellery together with ceremonial type of service for the younger generation ⚫ MARCO BICEGO - feature artisanal craftsmanship and contemporary design concepts ⚫ Continue to promote Personalised Jewellery Service via omni-channel retailing
Omni-channel Retailing
⚫ Seamless online / offline shopping experience ⚫ Integration of sales force, physical stores, e-Commerce platforms, mobile devices, logistics facilities and services ⚫ e-Commerce platforms remain to be an important part
29 Date Here Q&A Session
30 Appendix
31 Company History
1930-1970 1970-1980 1980-2000 2000-2020
1934 1960 1973 1990 1995 2001 2005 2014 2019 Chow Sang Started First Chow Sang • First Started Became a Chow Sang Chow Sang Sang multiple jewellery Sang jewellery online De Beers Sang Sang Goldsmith business company Precious company shopping Sightholder Production Intelligent established as a to be listed Metal to set up service Centre in Fulfilment in jewellery in Hong Laboratory official Shunde Centre in Guangzhou store Kong was website started Shunde established operation started (Stock Code • EMPHASIS 116) and qualified operation as an entered accredited Taiwan laboratory market
Sustained Vitality, Ever Rejuvenated
⚫ “Sustained Vitality, Ever Rejuvenated” is the spirit of Chow Sang Sang. It is a philosophy that fuels our passion for constant and never-ending improvement.
32 Multi-brand Strategy Highlights
32 33 EMPHASIS – A Store Brand for Sophisticated and Fashion-centric Females
⚫ EMPHASIS continues to define the new fine jewellery in daily wear market with bold designs by expanding its footprint in Mainland China and Hong Kong. ⚫ The store targets at sophisticated & fashion-centric female market segment.
Beijing China World Mall, opened in Jan 2020
Hong Kong IFC Mall (pop-up store), opened in Jan 2020
34 MINTYGREEN – A Store Brand for Fans of Daily Wear Jewellery
⚫ MINTYGREEN captures the attention of Generation Y, who purchased their first jewellery. ⚫ IP collaborations, young celebrity endorsement and omni-channel sales operations model linked with social media are the brand features.
35 PROMESSA - A Store Brand For Millennial Couples
⚫ PROMESSA, the Italian word for “promise”, is the name of our signature line of engagement rings and wedding bands. ⚫ The first PROMESSA wedding specialty store was opened in Chongqing in May 2020. ⚫ The store is designed to provide made-to-order personalised jewellery together with ceremonial type of service, like marriage proposal, for the younger generation.
36 MARCO BICEGO - A Store Brand of Artisanal Craftsmanship
⚫ MARCO BICEGO, an Italian jewellery brand featuring unique hand-crafted pieces through artisanal craftsmanship and contemporary design concepts, has been a staple in our stores since 2000. ⚫ The opening of the brand’s first store in Beijing marks the expansion of our international sophisticated daily wear influence in Mainland China.
37 New Stores 2020
Jinhua, Mainland China Chongqing, Mainland China Beijing, Mainland China
Taoyuan, Taiwan Xuzhou, Mainland China Beijing, Mainland China
Mainland China 24 Hong Kong and Macau 1 Taiwan 1
38 Omni-channel Strategy Highlights
32 39 The Omni-channel Ecosystem
Aim to serve our customers seamlessly across all channels
e-Commerce Platforms
Intimate Service via IM Social Media Communication
Customer Dispatch Relationship and Delivery Management
Physical Stores
40 High Level of Personsalisation and Seamless Omni-channel Experience
Personalise and design your own jewellery with more than 24,000+ exquisite combinations
Freely pair up your own choice of diamond and design setting Engrave and set your birthstones to express your personal message Diamond 3,000+ Setting Design 80+ Combination 24,000+
Wechat Mini- program
Official eshop Shop visit online reservation
Online Platform Store Social Media Marketing Experiencing Personalised and Professional Service Monthly Page View 145,000+ • Solitaire Try-on Collect and analyse • One-to-One shopping experience customer design and • Interactive online browsing and • Pick up online order preference to improve design your own jewellery the offerings • Online order
My Design Code - to retrieve your own design in various online and shop order platform
41 C2M ‧ Customer-driven Manufacturing
• One ordering platform connects customer frontend to backend production management system • Manufacturing is driven by customer demand and preference
■ Link to advanced planning & scheduling system and production management system Manufacturing ■ Route orders to different regional hubs automatically to optimise efficiency and capacity
Order Personalised Order Data Placement
Personlisation Component/Service Option Leadtime Warehouse & Logistic Centre
■ Provide simultaneous data Raw Material and Product Pick up ■ Customer can track the production and Parts Planning and analysis for raw logistic status in online platform material and parts replenishment
42 Star Concierge
⚫ The one-on-one jewellery sales service was launched in both Mainland China and Hong Kong
⚫ Design to provide a personalised jewellery shopping experience to our consumers at their fingertips
⚫ Allow our sales advisors to reach and engage customers remotely
⚫ Customers can appreciate our products and place order online. The order can be delivered to their home or collected at our stores.
43 Star Concierge Star Concierge is designed to fit into social and communication ecosystems, making distance shopping convenient and easy for every customer Mainland China and Hong Kong
IM
One-on-One Sales Advisor Recommendation Engagement & Purchase Delivery
Store Pick-up Delivery
44 Industry Analysis
32 45 Industry Analysis – Hong Kong and Mainland China
Value of retail sales of 2H 2019 – 1H 2020 2H 2019 – 1H 2020 Hong Kong Jewellery, Watches and Clocks, and Valuable Gifts Mainland China Gold, Silver and Jewellery Sales
10.00 30.0 26.8
8.00 7.27 7.29 25.0 6.91 21.2 21.2 6.52 20.5 20.3 19.9 19.3 6.00 20.0 17.5
n 5.22 5.17 b
4.86 n 15.5 4.37 b 14.7
15.0 13.9 13.9 HKD HKD
4.00 3.30 HKD 2.65 2.18 10.0 1.80 2.00 5.0
0.00 0.0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2019 2019 2019 2019 2019 2019 2020 2020 2020 2020 2020 2020 2019 2019 2019 2019 2019 2019 2020*2020* 2020 2020 2020 2020
Source: HK Census & Statistics Source: National Bureau of Statistics of People’s Republic of China
By comparing 1H2019 with 1H2020, the value of sales of Retail sales for jewellery products in Mainland China jewellery, watches and clocks, and valuable gifts were were RMB134.8 billion and RMB97.6 billion for 1H2019 HKD 40.62 billion and HKD 23.74 billion respectively, and 1H2020, decreased 27.60% y-o-y, according to the decreased 41.56% y-o-y, according to Hong Kong Census data from National Bureau of Statistics of People’s and Statistics Department Republic of China.
* In order to eliminate the impact of the different date of the “Chinese New Year” (CNY) each year, and enhance the comparability of data, in accordance with the national statistical system, the data in January and February 2020 were investigated and released together. Here the data is evenly divided as RMB13.9 billion.
46 Thank you
47